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Image by AFP via @daylife

At the beginning of the year, Time Warner Cable and MSG Networks squared off over the latter's demand for a hike in the carriage fee for its programming. It appears that the issue still hasn’t been resolved and the two companies are still squabbling over this issue. [1]

MSG Networks is demanding a price hike of 53%, which is much larger than what Time Warner Cable is willing to pay. [2]

This spat affects about 2.8 million subscribers in New York and New Jersey, who are not able to watch some of their favorite games including the coverage of the New York Knicks, New York Rangers, Buffalo Sabres, New York Islanders and New Jersey Devils. [2]

Time Warner Cable’s rival Dish Network , as well as others like Cablevision, have also been involved in such disputes with big media companies like Disney, owner of ESPN and ABC.

MSG Networks’ current fee per subscriber stands at around $4.65 per month. [2] A 53% increase would imply an additional cost of about $2.46 per subscriber per month for Time Warner Cable.

As this impacts about 2.8 million subscribers, Time Warner Cable will face increased costs of about $80 million a year. If the company chooses to absorb these costs, we estimate that there could be about 10% downside to our current $65.67 price estimate.

Time Warner Cable has high leverage and any increase in costs affect its value significantly. However, this might still be a better bet compared to losing subscribers and facing brand damage if the stand-off between the company and MSG Networks continues too long.

Sports networks have been blamed by service providers as the prime culprit for increased costs for customers. With the NFL demanding as much as 70% increase in fee, the rise in sports programming costs becomes inevitable. Consequently, service providers are looking to drop sports programming from lower-end packages to control costs for customers.